Force majeure events and stock market reactions in Ukraine

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This paper examines reactions in the Ukrainian stock market to force majeure events, which are divided into four groups: economic force majeure, social force majeure, terrorist acts, natural and technological disasters. More specifically, using daily data for the main Ukrainian stock market index (namely PFTS) over the period from January 1, to December 31, 2018 this study investigates whether or not force majeure events create (temporary) inefficiencies and there exist profitable trading strategies based on exploiting them. For this purpose, cumulative abnormal returns and trading simulation approaches are used in addition to Student’s t-tests. The results suggest that the Ukrainian stock market absorbs new information rather fast. Negative returns in most cases are observed only on the day of the event. The only exception is technological disasters, the market needing up to ten days to react fully in this case. Despite the presence of a detectable pattern in price behavior after force majeure events (namely, a price decrease on the day of the event) no profitable trading strategies based on it are found as their outcomes do not differ from those generated by random trading.

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    • Table 1. Descriptive statistics for the PFST returns over the period 1997–2018
    • Table 2. Cumulative abnormal returns for the PFST index over the period 1997–2018: economic force majeure events
    • Table 3. T-test for the PFST returns over the period 1997–2018: economic force majeure events
    • Table 4. Trading simulation results for the PFST returns over the period 1997–2018: economic force majeure events
    • Table 5. T-test for evaluating the success of the trading strategy: PFST returns over the period 1997–2018, economic force majeure, α=1
    • Table 6. Cumulative abnormal returns for the PFST returns over the period 1991–2018: social force majeure and terrorist acts
    • Table 7. T-test for the PFST returns over the period 1991–2018: social force majeure and terrorist acts
    • Table 8. Trading simulation results for the PFST returns over the period 1991–2018: social force majeure and terrorist acts, α=1
    • Table 9. T-test for evaluating the success of the trading strategy: PFST returns over the period 1991–2018, social force majeure and terrorist acts, period α=1
    • Table 10. Cumulative abnormal returns for the PFST returns over the period 1991–2018: natural disasters
    • Table 11. T-test for the PFST returns over the period 1991–2018: case of natural disasters
    • Table 12. Trading simulation results for the PFST returns over the period 1991–2018: natural disasters, α=1
    • Table 13. T-test for evaluating the success of the trading strategy: PFST returns over the period 1991–2018, natural disasters, α=1
    • Table 14. Cumulative abnormal returns for the PFST returns over the period 1991–2018: technological disasters
    • Table 15. T-test for the PFST returns over the period 1991–2018: technological disasters
    • Table 16. Trading simulation results for the PFST returns over the period 1991–2018: natural disasters, α=1
    • Table 17. T-test for the trading strategy effectiveness evaluation: PFST returns over the period 1991–2018, natural disasters, α=1
    • Table 18. Overall results for Hypothesis 1
    • Table 19. Overall results for Hypothesis 2
    • Table A1. The main economic force majeure events in Ukraine during 1991–2018
    • Table B1. The main social, military and political force majeure events and terrorist acts in Ukraine during 1991–2018
    • Table C1. The main natural disasters in Ukraine during 1991–2018
    • Table D1. The main technological disasters in Ukraine during 1991–2018